Month: April 2014

As we well know and frequently heard since last year (at least since September 2013, when Commissioner Kroes launched the Connected Continent proposal), international roaming tariffs within the EU should soon disappear. While travelling, European citizens will then be able to call, use SMS or access Internet via mobile device without surcharges, anywhere in the EU. On April 3, 2014 the plenary session of the European Parliament approved the proposal tabled by the European Commission, although with drastic amendments with respect to the initial draft. The completion of the entire reform (containing a puzzle of different measures, well beyond roaming) will require the final approval of the Council, which is deemed to happen – optimistically – sometimes before the end of 2014.

The question is whether the end of international roaming should be given already for granted or not; in the latter, whether one should rather better examine the proposed rules and maybe find that the promised scenario is more complex. The mediatic campaign ran by the concerned European institutions and politicians (Kroes, Barroso, Del Castillo, ecc) have always showed the end of roaming as a simple result of the debated reform. This is comprehensible, because the end of roaming constitutes a formidable political achievement for policy-makers, therefore the temptation to be recorded in the history as the leader of this achievement is great. Viviane Reding, who was the first European commissioner to address the roaming issue in 2006, got an incredibile popularity from this action.

However, a more deep analysis of the proposed roaming reform show that the resulting scenario may be less exciting than expected. Provided that everything goes through, without obstacles and delays in the following approval process involving the Trialogue (Parliament, Commission and Council), what will actually happen with the currently proposed rules? Will really international roaming disappear in the EU? And when exactly? Will current mobile tariffs remain basically the same? Here the answers in peanuts.

Incoming calls

As from July 1st, 2014 (thus, just in a couple of months!), European citizens should no longer be subject to roaming surcharges for incoming calls received when abroad. In other words, we will not have to pay an additional fee for the fact that somebody is calling us while we are travelling abroad, as it is the (irritating) case now. Therefore, calls received abroad will be treated like any call received when we are at home: only the calling party has to pay, not the one receiving the call.

HOWEVER: since the reform will be (optimistically) in force only at the end of 2014, this means that up to that date consumers will be continuing to pay for incoming calls, despite the fact that the reform sat the final deadline for July 1st. It is a strange, hilarious paradox.

Outgoing calls, SMS and Internet

As from 15 December 2015 roaming charges for calls, SMS and internet usage, should disappear completely. When travelling abroad, European citizens should continue to pay just the domestic rate. This will be a great achievement for the EU, something very important in times of Euro-skeptisism.

HOWEVER: despite the above, the proposed reform provides for an exception which may even become the rule: mobile operators may continue to apply roaming surcharges (although within the limits of the current regulated caps established by European Regulation 531/2012) if users consume a quantity of traffic which is considered “not fair”. In other words, the elimination of roaming may be limited to just the “usual” and “fair” traffic usage of people when traveling abroad. BEREC, the European agency for telecommunications, should adopt guidelines to precise what “fair usage” means (in quantitative terms). In any case, mobile operators will have the power, not the obligation, to apply this “fair usage” condition. Thus: despite the optimistic declaration by the European institutions, the actual elimination of roaming charges will depend, on one side on how many operators will actually use the “fair usage” faculty; on the other side, on the actual notion of “fair usage” decided by Berec.

What is the sense of the “fair usage” limitation? The problem is that incumbent mobile operators are afraid of the so-called “permanent roaming”, i.e. a market scenario where the same tariffs apply everywhere in the EU, therefore there is no difference any longer between domestic and roaming in terms of prices. In such a scenario, European citizens could get mobile offers from any mobile operators based in the EU, since the agreed tariffs will be valid everywhere within the EU. In such a scenario, the competitive landscape of the mobile industry will change dramatically, since every operator would be able to compete everywhere within the EU. The consequence of this business dynamic would be a dramatic market consolidation, with the number of operators collapsing from 100 operators to a dozen or less. This kind of consolidation was – by the way – the official aim of the Connected Continent philosophy: the fewer operators in the EU, the better. It is therefore surprising to see that the European Commission left to operators the possibility to opt out.

Domestic tariffs

Will mobile operators just acknowledge the end of roaming, become more efficient and/or renouncing to make easy money, or will they try to rise domestic tariffs to compensate the loss? In a competitive scenario, rising tariffs will not be easy at all. However, the competitive landscape imagined and desired by the European Commission is not so promising. Fact is, the proposed reform does not take into account the fact that many medium-small mobile operators, including MVNO, will have difficulty in providing communications services abroad because the prices of access to foreign networks (necessary to provide roaming) may be too high, or even higher than retail prices. In other words, such small and competitive operators may be losing money when providing services abroad at domestic tariffs. The paradox is that some of such operators mobile may prefer to stop communications services abroad, others may even close the business. This involution of the market would favor just larger mobile operators (Vodafone , Telefonica, T-Mobile, etc.) which, strengthened by an increased market power, could increase domestic rates. In other words , the advantage of the disappearance of roaming could be negatively compensated by the increase of domestic rates in general.

According to the European Court of Justice, the amount of the levy payable for making private copies of a protected work may not take unlawful reproductions into account. This principle has been stated today in the decision ACI Adam BV and Others v Stichting de Thuiskopie, Stichting Onderhandelingen Thuiskopie vergoeding (case C-435/12).

According to the court, the fact that no applicable technological measure to combat the making of unlawful private copies exists is not capable of calling that finding into question. The decision at stake involves a couple of relevant consequences for national policy makers and jurisdiction in the matter of private copy levies and fight to online piracy.

Facts

The current legislation in the Netherlands imposes a private copying levy on electronic devices with storage devices in order to compensate copyright holders for the unlawful reproduction of their works. The decision of the ECJ, following the AG opinion of January 9th, 2013, maintains that such Dutch legislation is detrimental to the functioning of the internal market as far as it allows reproductions for private use from unlawful sources. Moreover, the court noted that “national legislation which makes no distinction between private copies made from lawful sources and those made from counterfeited or pirated sources cannot be tolerated”. This indiscriminate application effectively penalises users who lawfully reproduce their digital content from authorized sources as they also pay the private copy levy and creates a disincentive for business based on legal content.

Consequences for private copy legislations

This ruling will have an impact in countries where the private copy levies mechanism has been arbitrarily used as a compensation for the potential losses deriving from online piracy. In various countries (for instance Italy) the right-holders are lobbying the government to increase the levies on the grounds that their revenues are declining because of pirated content on the iNternet. By doing so, however, the industry blurs the difference between legal and illegal content and creates a contradiction: if pirated content is illegal it should be stopped, not remunerated, both things together are not possible. Some legislators or governments did not understood such distinction and believed that the such kind of mechanism may be a way to make everybody happy: rights-holders and pirates. Right holders may be happy about this solution, because at the very end they want money and not principles: but they stop to fight piracy then.

The ECJ correctly quashed the above reasoning and reinstated the correct interpretation and application of the private copy exception.

Consequences for pirated content

Clearly, the hidden result of the Dutch legislation was to legalize illegal content. In fact, if illegal content is taken as a basis to remunerate rights-holders via the private copy mechanism, then it will not illegal any longer: it will be part of the business. In this case, however, one should stop to fight piracy, which will become a licit business remunerated via a peculiar way. From policy point of view, it is an interesting perspective, however such approach requires a correct legal basis to go ahead.

And in fact, the ECJ rebutted this reasoning, because the private copy mechanism (which is an exception to copyright, but he way, applicable only in some countries and in different ways) has not been deemed for this purpose. Of course Netherlands could decide to legalize illegal content (like drugs!), but they have to choose another legal basis.

Other consequences: filtering?

Following the ECJ’s decision, some stakeholders and commentators have started saying that now Dutsch ISP should start to filter Internet traffic in order to intercept and block users making illegal download. To this purpose, someone has evocated the latest ECJ’d decision on web-blocking (the UPC case). See for instance the director of Brein, the Dutch anti piracy committee:

“It’s BREIN to do about the fact that there are illegal traders on the internet (sites and services) that make it their business to facilitate access to illegal content ,” said BREIN director Tim Kuik. “Obviously it’s of the utmost importance that we can claim blocking of access to persistent illegal websites. Blocking [of Pirate Bay] was recently rejected by the appeal court in The Hague. BREIN asked the Supreme Court to annul that decision”

This approach is not correct. Monitoring/filtering was admitted by the ECJ in the well-known Sabam case only under strict criteria which, to my opinion, make this measure not really enforceable in practice. In any case, it should be up to the national courts/legislators to foresee a blocking mechanism allowing ISPs to detect illegal downloading without infringing the principles laid down by the European court.

This new Dutch case does not add anything to this perspective. In many countries pirated downloading is already an illegal practice, even a criminal fact: whether ISPs may be required to intercept such conducts is still the same old story. In any case, the reference to the UPC case is inappropriate, because:

– filtering of content to block it (like in Sabam); and

– filtering of Internet traffic for the sole purpose to block the access to a forbidden website (like in the UPC case);

are technically not the same thing. Filtering like in the Sabam case requires a kind of DPI, because intercepting illegal downloading involves an intrusive analysis of IP packets; by contrast, blocking Internet traffic towards a given destination should be in principle less intrusive, depending on the kind of technology chosen to implement the measure. In any case, in the UPC case the European Court made clear the web-blocking should not interfere with individual rights, including privacy – this should prevent ISPs from applying DPI technologies to implement web-blocking measures.

I just gave an interview to Euractiv in the matter of search neutrality, here my answers:

Net neutrality is a key topic in the EU debate and will likely remain so with the next Commission and Parliament. Can you give us a simple explanation of what it’s about?

Net neutrality means that internet service providers (ISPs), i.e. the telecoms operators providing internet access, are prevented from controlling which services or applications their subscribers can access on the internet. ISPs may affect such freedom by blocking, limiting, throttling access to services, or by differentiating the price of internet traffic for a given online service, favouring one service over another.

This means that for having a neutral internet, data traffic should be treated the same way?

This is a misleading debate. Internet bits are currently treated differently because of technological and routing reasons, and especially to avoid congestion. But net neutrality is not impaired if such bits management is not aimed at controlling what users want to access. Traffic management should not be a taboo, provided no specific services are discriminated.

Would net neutrality be preserved if ISPs were transparent about their traffic management?

Transparency does not solve the issue, because for a consumer it is not satisfactory to be informed about restrictions. Consumers just want to get an open Internet.

Is the consumer not free to change their ISP?

There are hundreds of ISPs in Europe, but they are just a few for a given consumer due to national barriers. Moreover, once an ISP is chosen, consumers are reluctant to migrate to other ISPs because of technical, contractual and timing reasons. This so-called lock-in is a fundamental barrier which limits consumers’ choices more than in other markets. For instance, the online search market is also under a kind of neutrality threat, but at least does not have the further anti-competitive pattern of the lock-in.

Where is the problem in the online search market?

The online search market is dominated by one player, Google, which potentially has the capacity of conveying web traffic, like a dominant ISP can do with internet traffic. The moment when Google starts to privilege one destination, rather than another, it is posing a threat to the “neutrality” of online search.

Can we therefore draw a parallel between net neutrality and search neutrality?

I would be cautious about this. In my opinion, internet search can never completely be neutral. Search tools and criteria are never completely objective, since they are designed, in a way, to meet the profile of users. If this is done well, the search engine will be successful, and consumers will recognise it.

Where does Google pose a risk then?

The main problem with search activities is transparency. Consumers may accept that some search results are displayed in a privileged manner, for example, to show advertisements. However, if advertising is done in a non-transparent way, search results may be misleading.

But consumers remain free to switch to other search engines?

True. Indeed, the main difference between the internet and the search sector is the lock-in factor. While for ISPs the lock-in is a fundamental barrier for changing provider, in the search engine market the lock-in does not work. If there is an alternative search engine, a simple “click” is enough. This is the main threat and weakness for Google.

Why then Google is so dominant, if the lock-in does not apply?

Google is dominant because customers recognise that it is the best service, not because they are locked. This success has been built through important investments in software and hardware, especially huge data centres. The continuing search activities all over the years reinforced its position, creating a kind of “information barrier” for potential competitors. This is a problem for online service providers, which are de facto locked into the dominant platform.

Will Google maintain its dominant position?

Things could change, if results displayed by Google became all for-pay, so that you have to scroll through various pages to find non-advertised results. In the long run, this would damage Google’s reputation. The same effect would come if Google diminished the transparency in distinguishing paid results from neutral material. Another problem is privacy and profiling, if the users start to think that the “personal data in exchange of free services” deal is not convenient anymore.

Today the European Court of Justice has declared invalid the European data retention directive (Directive 2006/24/EC), i.e. the entire set of rules obliging in Europe ISPs and telcos to retain data and information about citizens using electronic communications networks.

The Court has recognised that retention of personal data for purpose of investigations is per se compatible with the European framework, although it may potentially interfere with basic fundamental rights such as privacy. However, the Court also found that the set of obligation laid down by current directive is disproportionate and contrary to some fundamental rights protected by the Charter of Fundamental Rights, in particular to the principle of privacy, because “the wide ranging and particularly serious interference of the directive with the fundamental rights at issue is not sufficiently circumscribed to ensure that that interference is actually limited to what is strictly necessary” (NB: since the entry into force of the Lisbon Treaty in December 2009, the Charter of Fundamental Rights has the same value as the EU treaties, thereby forming part of the EU primary law). In particular, the Court challenges the following:

– the directive covers, in a generalised manner, all individuals, all means of electronic communication and all traffic data without any differentiation, limitation or exception being made in the light of the objective of fighting against serious crime;

– the directive fails to circumscribe, from both procedural and substantial point of view, the notion of “serious crime” and opens risks to potential abuses in the Member States;

– also the data retention period (from 6 to 24 months) is too generic and should be adapted to the specific objectives (crimes to be fought) to be pursued.

Interestingly, the question is what will happen with the current national legislations which have been enacted as transposiiton of the invalid directive.

Although one could think that also these legislations have become invalid, this is not an automatic effect from the annulment judgment. My comments hereinbelow.

– The effects of invalidity ruling of a EC directive over the implementing national provisions

Neither the EC Treaties nor the precedent of the European court give clear guidance to this purpose.

According to art. 249 of the Treaty: “A directive shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods”.

This means that, in case of the annulment of a directive, it is up to the Member State to evaluate how to proceed. For the time being, we can see 2 main scenarios:

– in case of national provisions transposing EC rules declared void because they conflict with other prevailing EC rules (preeminence of privacy, for instance, as in the present case), the Member State has very little discretion. The national provisions must be abrogated quickly: if not, apart from a potential risk of infringement procedure by the European Commission, national courts and administrations shall dis-apply them immediately from now. In other words, following a well-established jurisprudence, such national provision remain formally in force but without effects vis-à-vis individuals;

– to the opposite, if a directive is annulled because of a procedural reason, or if some of their provisions are not incompatible with the EU ruling, then Member States could make the necessary adjustments and maintain the national legislation in force. It will be a case-by-case evaluation, which may be complicated in practical circumstances. Fact is, some valid provisions can make sense only with other provisions which, however, have been maybe declared incompatible with EU law.

– The consequences for Member States

Thus, in the present data retention case, Member States seem to have the alternative between:

1. abrogating the entire national data retention legislation; or:

2. modify that legislation in order to meet the “proportionality concern” of the European Court.

If a Member State does not act quickly, it will be potentially subject to an infringement procedure by the European Commission. This will be quite paradoxical, because the Commission imposed fines on Member States for not complying with the directive. Some countries refused to implement the directive because of internal constitutional reasons (Germany, Romania, Czech, and in part also Cyprus and Bulgaria). For the European Commission is an embarrassing situation.

– The consequences for the operators

In the meanwhile, if an operator claims that the national data retention cannot applied against it, it has an interesting case to defend. As stated above, the national data retention provisions have not been abrogated by the European Court, however they have become ineffective as far as they do not pass the “proportionality test” indicated in the judgement. In my opinion, most of the national data retention legislation enacted in Europe after the 2006 directive do not pass that test. As a consequence, these data retention obligations are still in force but not effective anymore. What will happen in practice? While the central government will wait time before taking a decision, at local level law enforcement and public prosecution services might still order the retention of data under the cybercrime convention regulation and defend their point until a court declare that such provisions are not applicable any longer. As a result, if ISPs refuse to enforce the (ineffective but non abrogated) data retention local legislation they might be fined and required to challenge in court the punishment.

On the other side, the same operators are in a messy situation, because individuals could argue that the retention of their personals data on the operators’ servers is now illegal. One should remind that until the 2006 data retention directive came into force, retaining data was a voluntary or administrative practice aimed at some limited scopes like billing. However, with the annulment of the data retention directive such practice may be seen as an infringement of European privacy rules, that would amount to a criminal liability in some countries. In order to avoid such risks, operators could better decide to delete all the traffic data currently recorded on their servers.

– Next steps (UPDATE 11 APRIL 2014)

On Friday 11, 2014 a meeting between Commission, privacy authority and stakeholders took place in Brussels in order to discuss the consequences of the judgement. In the reality, the meeting had been scheduled since time in order to monitor the implementation of the data retention directive, however following the judicial annulment of the same the agenda was adapted accordingly. As far as I know, the European Commission informally declared the following:

1. the national legislations are still valid despite the annulment judgement. MY COMMENT: this is debatable, because most of the national legislation have implemented the annulled directive without changes and modifications; a legal mess is now emerging because individuals may challenge the retention of data by ISP and use of that by public authorities;

2. The European Commission will not adopt guidelines in relation to the consequence of the annulment. MY COMMENT: this is disappointing. The Commission created a problem (and costs for the ISPs) and now they do not see the reason for intervening to limit damages.

Most probably, it will up to the national data protection authorities to intervene in order to provide some certainty, if possible.

In the meanwhile, some Swedish operators have announced that they will stop the data retention activity following the annulment of the directive,

– Reactions

Commissioner Malstrom, competent for Hoime affairs, has declared the following: “The judgment of the Court brings clarity and confirms the critical conclusions in terms of proportionality of the Commission’s evaluation report of 2011 on the implementation of the data retention directive. The European Commission will now carefully asses the verdict and its impacts. The Commission will take its work forward in light of progress made in relation to the revision of the e-Privacy directive and taking into account the negotiations on the data protection framework“.

Also the President of the European Parliament, Schulz, intervened with a statement urging the Commission for a new proposal: “Today’s judgment must be carefully examined and the Commission will have to make a proposal which strikes the right balance between the legitimate interests at stake. Any new proposal must respect in every detail the guarantees laid down in the Charter of Fundamental Rights. It should in particular enshrine a high level of data protection – which is all the more essential in the digital age – thus avoiding disproportionate interferences with the private lives of citizens. It is only by upholding the highest standards at home on such issues that we can project our common values to the outside world.”

EDPS, the European Data Protection Authority, stressed that new directive should this time be complying with privacy rules:

“The EDPS welcomes the ruling of the Court of Justice of the EU in Digital Rights Ireland and Seitlinger and Others (Joined cases C-293/12, C-594/12) on the invalidity of the Data Retention Directive (Directive 2006/24/EC). It follows the input given by the EDPS in these proceedings.We consider this a landmark judgment that limits the blanket government surveillance of communications data (telephone, texts, email, internet connections etc.) permitted under the Directive. It highlights the value placed on the protection of fundamental rights at the core of EU policy in this critical area.We are particularly satisfied that the Court has underlined that the Data Retention Directive constitutes a serious and unjustified interference with the fundamental right to privacy enshrined in Article 7 of the EU Charter of Fundamental Rights. When an act imposes obligations which constitute such interference, the EU legislature should provide for the necessary guarantees rather than leaving this responsibility to the member states.We are pleased that the Court has ruled that the retention of communications data should have been duly specified and the EU legislator should also have ensured that such data can only be used in very specific contexts.The retention of communications data for the purposes of the combat of crime should always be precisely defined and clearly limited. The EU cannot leave the full responsibility for the use of the data with the member states.Among other things, the concept of serious crimes should have been more precisely described in the Directive and at the very least, basic principles governing access to and the use of the retained data should have been set out.We anticipate that the Commission, taking into account the Court’s judgment, will now reflect on the need for a new Directive, which will also prevent member states from keeping or imposing the same legal obligations nationally as laid out in the now invalid Data Retention Directive. The judgment also means that the EU should take a firm position in discussions with third countries, particularly the U.S.A. on the access and use of communications data of EU residents“.

Today (2 April) or tomorrow (3 April) the European Parliament will take an important decision in the matter of Net Neutrality in the EU. While voting in the frame of the well-known Single Market proposal, the MEPs will have to decide amongst various options: a main proposal tabled by the rapporteur Pilar del Castillo (a Spanish parliamentarian of the PPE – populars); counter-amendments tabled by Socialists, Liberals and Greens (Amds 234-236 and 237-244); and the complete rejection of the proposal.

The big telco industry (ETNO, ECTA, GSMA and Cableurope) is unanimously against the reform, although is not clear what the single telecom operators really want in practice. Unified in rejecting, confused in proposing.

Neelie Kroes, the commissioner which made the initial proposal, just wrote a letter to the MEPs recommending how to vote. An unusual move, I believe, which could irritate some of them.

Remarkably, everybody plead in favor of an Open Internet. Apparently, the notion of Open Internet may vary significantly amongst institutions and stakeholders.

It is worth-noting that, according to Mrs. Kroes, Open Internet just means “no blocking and no throttling”. Unfortunately, this is a just a basic, limited vision about how the Internet environment works. Fact is, the same result of blocking could be simply achieved by telcos by charging in different way the Internet connectivity used by users or Internet providers to reciprocally connect. To make an example, if an ISP started to charge 10 Euro upon users for using Skype, this commercial behavior would be equal to a block: people would stop to use Skype because nobody would pay for a service which is normally for free. Such abusive practices happened sometimes in the past, but they did not kill Skype, because they were enforced irregularly and too late, when Skype was already sufficiently strong to resist. But: if in 2004 Internet users had systematically to pay 10 Euro or more to access Facebook in its infancy, they would have immediately given up, even if the alternative service proposed by their ISP was totally crap, because nobody had a clear idea about social networks. In other words, this kind of discriminations may kill start-up, new entrants and innovative services, while consolidated operators, irrespective whether OTT or telcos, would survive in any case. This is why the Open Internet is not a battle between OTT and telcos, is rather a battle for the citizens and their rights.

Would the above abusive charging mechanism become the norm in the market, then users would have to pay a less expensive Internet subscription to access services agreed by the ISP, and a more expensive Internet subscription to access all the rest. The Internet would be completely different now.

Mrs. Kroes does not seem aware of the above. By contrast, her initial proposal encouraged such kind of price discrimination by way of data caps and other instruments. Remarkably, the net neutrality legislation currently existing in her country, the Netherlands, prohibit the discrimination of Internet connectivity, contrary to Kroes proposal.

The proposal of Pilar del Castillo confirms the Kroes’ approach, while the counter-amendments proposed by Socialist, Liberal and Greens try to address the problem. However, the matter remains a bit unclear. An Open Internet legislation should clearly state that ISPs cannot discriminate the price of Internet connectivity in order to favor an Internet service over another. The amendments proposed by Socialists, Liberals and Greens reinforce the non-discrimination obligation in relation to network management practices. However, differentiating the price of Internet connectivity is not technically a form a traffic shaping, it is rather a pure commercial practice. Therefore, this issue remains open in my view, however we should recognize that the counter-amendments of Socialists, Liberals and Greens have the merits to get closer to the problem.

PS: The net neutrality debate appears polarized by the definition of specialized services. I am not fascinated by this debate and by defining specialized services. Technology in the Internet is complex and evolve continuously, therefore getting an appropriate, correct and neutral definition of specialized services is an hard job and risks to be become frequently outdated. In this respect, a fair and correct analysis about specialized services has been carried out by EDRI and it can be found here. Such analysis served as a basis for the definition of specialized services proposed in the counter-amendments by Socialists, Greens and Liberals.

Whatever the definition may be, it would be better to state that the price of specialized services (managed services other than best effort) should be incremental, i.e. they should not cost less than best efforts, because quality services should cost more than unmanaged connectivity. If this principle is fairly applied (it would be for the national regulators to supervise it), I do not see the risk that ISP may use specialized services to subvert the Internet environment. Whatever the definition is, specialized services could not be used to replace Internet best effort.